HOPE for Homeowners Program: Program Regulations, 58418-58426 [E8-23612]

Agencies

• Board of Directors of the Hope for Homeowners Program

[Federal Register Volume 73, Number 194 (Monday, October 6, 2008)]
[Rules and Regulations]
[Pages 58418-58426]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-23612]



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Part VI





Board of Directors of the HOPE for Homeowners Program





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24 CFR Part 4001



HOPE for Homeowners Program: Program Regulations; Final Rule

Federal Register / Vol. 73, No. 194 / Monday, October 6, 2008 / Rules 
and Regulations

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BOARD OF DIRECTORS OF THE HOPE FOR HOMEOWNERS PROGRAM

24 CFR Part 4001

[Docket No. B-2009-F-01]
RIN 2580-AA00


HOPE for Homeowners Program: Program Regulations

AGENCY: Board of Directors of the HOPE for Homeowners Program.

ACTION: Final rule.

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SUMMARY: This final rule sets forth the core requirements for the HOPE 
for Homeowners Program that have been established by the Board of 
Directors (Board) of the HOPE for Homeowners Program (Program). A new 
section 257 of the National Housing Act (NHA) provides the authority 
for this Program and oversight requirements to be performed by the 
Board. Specifically, section 257(c)(1) of the NHA requires the Board to 
prescribe such regulations as may be necessary or appropriate to 
implement the Program. The Board has determined that the regulations 
set forth in this rule are necessary and appropriate for the 
implementation and effective administration of the Program.

DATES: Effective Date: October 6, 2008.

FOR FURTHER INFORMATION CONTACT: Emmanuel Yeow, Secretary of the Board 
of Directors of the HOPE for Homeowners Program, Department of Housing 
and Urban Development, 451 7th Street, SW., Room 9110, Washington, DC 
20410-8000, telephone 202-708-3600 (this is not a toll-free number). 
Persons with hearing- or speech-impairments may access this number 
through TTY by calling the toll-free Federal Information Relay Service 
at 800-877-8339.

SUPPLEMENTARY INFORMATION:

Background

    The HOPE for Homeowners Act of 2008, located in Title IV of 
division A of the Housing and Economic Recovery Act of 2008 (HERA), 
(Pub. L. 110-289, 122 Stat. 2654, approved July 30, 2008), amended 
Title II of the NHA to add a new section 257. New section 257 (12 
U.S.C. 1701z-22) establishes within the Federal Housing Administration 
(FHA), the Program, a temporary FHA program, that offers homeowners and 
existing mortgage loan holders (or servicers acting on their behalf) 
insurance on the refinancing of loans for distressed mortgagors to 
support long term sustainable homeownership, including among other 
things, allowing homeowners to avoid foreclosure. Section 257 of the 
NHA authorizes the Department of Housing and Urban Development (HUD) 
acting through the FHA to insure such refinanced eligible mortgages 
commencing no earlier than October 1, 2008, and such authority expires 
September 30, 2011.
    Under the Program, new mortgages are offered by FHA-approved 
mortgagees to mortgagors who are at risk of losing their homes to 
foreclosure. The new FHA-insured mortgage refinances the borrower's 
existing mortgage at a significant write-down. Eligible borrowers must 
be unable to afford their existing mortgage payments, must occupy the 
residence that is the security for the refinanced mortgage as their 
primary residence, and may not have any present ownership interest in 
another residence. Investors and investor properties are not eligible 
for the FHA-insured refinanced mortgages. Under the Program, 
participating mortgagors share their new equity and future appreciation 
with FHA. Additionally, participation in this Program is voluntary. No 
mortgagees, servicers, or investors are compelled to participate.
    Section 257 of the NHA prohibits the new mortgage loan insured by 
FHA from exceeding 90 percent of the appraised value of the property 
that is security for the mortgage, or 132 percent of the dollar amount 
limitation in effect for 2007 under section 305(a)(2) of the Federal 
Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)) for a 
property of applicable size. In addition, section 257 also provides 
that the term of the FHA-insured refinanced mortgage shall have a 
maturity of not less than 30 years, and must bear a single rate of 
interest that is fixed for the entire term of the mortgage. Section 257 
directs that a mortgagor participating in the Program may not grant a 
new subordinate lien on the mortgaged property during the first 5 years 
of the term of the mortgage insured under the Program, except as the 
Board may determine is necessary to ensure the maintenance of property 
standards, and subject to the requirements that any new outstanding 
liens (1) do not reduce the value of FHA's equity in the mortgagor's 
home; and (2) when combined with the mortgagor's existing mortgage 
indebtedness, do not exceed 95 percent of the home's appraised value at 
the time of the new subordinate lien.
    The fundamental principle behind the HOPE for Homeowners Act and 
this Program is that providing new equity for distressed homeowners may 
be an effective way to help homeowners avoid foreclosures.

This Final Rule

    Section 257(c)(1) of the NHA requires the Board to establish 
requirements and standards for the Program, and prescribe such 
regulations and provide such guidance as may be necessary or 
appropriate to implement such requirements and standards.\1\ In 
addition to this broad direction to establish requirements and 
standards for the Program, section 257 also outlines specific areas for 
which the Board is charged with establishing standards and policies for 
the Program.
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    \1\ The Board is composed of the Secretary of HUD, the Secretary 
of Treasury, the Chairman of the Board of Governors of the Federal 
Reserve System, and the Chairperson of the Board of Directors of the 
Federal Deposit Insurance Corporation, or their respective 
designees. Section 257(t) of the NHA also provides that the Board 
may ``prescribe, amend, and repeal such bylaws as may be necessary 
for carrying out the functions of the Board.'' Consistent with this 
provision, the Board adopted bylaws regarding its organization, 
staffing, and operational procedures. These bylaws were published in 
the Federal Register on September 4, 2008 (73 FR 51621) and provide 
that the Board's principal place of business is 451 7th Street, SW., 
Washington, DC 20410-0500.
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    This final rule provides the core requirements that the Board has 
determined are necessary and appropriate for the implementation and 
effective administration of the Program. Consistent with section 257 of 
the NHA, however, the Board may establish standards and policies 
through means other than codified regulations. More detailed provisions 
implementing these core requirements may be issued by the Board or FHA 
through orders, a Federal Register notice, or through FHA mortgagee 
letters (or similar administrative issuances). Because this is a 
temporary program designed to address the immediate needs of homeowners 
faced with the looming threat of foreclosure, the regulations adopted 
by the Board are limited to the basic requirements of the Program. The 
Board's objective is to adopt regulations that address the core 
features of the Program, include necessary safety measures to avoid 
fraud, waste, and abuse, and leave FHA with sufficient flexibility to 
issue such guidance or processing requirements to make this a Program 
that is able effectively to assist distressed homeowners avoid 
foreclosure.
    The regulations in this part present the purpose, the authority 
delegated to FHA, and reference to FHA requirements that are applicable 
to the Program.\2\ The regulations define the

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key Program terms, and address the following Program areas: 
underwriting standards, representations of the mortgagee whose 
mortgagor will participate in the Program, mortgagor representations, 
certain prohibitions imposed on FHA, FHA equity sharing with the 
borrower, FHA appreciation sharing with the borrower, the prohibition 
on subordinate liens during the first five years of the mortgagor's 
Program mortgage, and applicable hearing procedures. The Board has 
determined that regulations addressing these areas are necessary for 
immediate implementation and long-term administration of the Program.
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    \2\ Section 4(b) of the Department of Housing and Urban 
Development Act, 42 U.S.C. 3533(b), provides that the Federal 
Housing Commissioner shall head a Federal Housing Administration 
within HUD and shall have such duties and powers as may be 
prescribed by the Secretary of HUD. The Secretary of HUD has 
delegated to the FHA Commissioner the power and authority to carry 
out all FHA mortgage insurance programs, including authority to 
issue rules or regulations to carry out these programs.
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    The payment to FHA of the equity created in the property as a 
result of the refinancing of the eligible mortgage is designed to avoid 
any windfall to mortgagors that would arise as the result of the 
refinancing. The same windfall avoidance concept also applies to the 
requirement that property appreciation be shared between the homeowner 
and FHA, the latter which is authorized to share any appreciation funds 
with subordinate mortgage holders.
    Section 257(e)(4)(B) requires that, at a minimum, the Board take 
into consideration three factors in determining the amount of 
appreciation a subordinate mortgage lien holder may receive. The first 
factor is the status or relative priority of the subordinate liens. 
This factor is addressed in the payout allocation set forth in the 
rule. After sale or disposition of the property, HUD's 50 percent 
appreciation interest is paid to prior mortgage lien holders in order 
of the seniority in which their mortgage liens were held, to the extent 
of HUD's share. Mortgage lien holders that were in 2nd position behind 
the 1st mortgage will be paid first, then 3rd mortgage lien holders, 
and when the claims of all prior lien holders have been satisfied, HUD 
will retain the balance, if any.
    The second factor is the outstanding principal and accrued but 
unpaid interest of the existing senior mortgage and subordinate 
mortgages. Since the total balances may not accurately reflect the 
amount the mortgagee potentially could recover in a foreclosure, the 
Board determined that these balances should be compared to the 
appraised value of the property. Therefore, this factor is expressed in 
the matrix described below as a cumulative combined loan-to-value 
(CLTV).
    The third factor is the extent to which the principal and accrued 
interest owed on the mortgages that are senior to the particular 
subordinate mortgage exceed the property's current appraised value. 
This factor is taken into account as well in the matrix for 
appreciation sharing because the amount a subordinate mortgage holder 
may receive is based in part on the amount of principal and interest, 
calculated at the pre-default contract rate, owed on those mortgages 
that are more senior than the subordinate mortgage in question.
    The Board gave very careful consideration to these three factors by 
examining several models developed to implement this authority. The 
initial models were very intricate and concern was raised that adopting 
any of them would cause confusion in the mortgage marketplace, and 
discourage subordinate mortgage holders and servicers from 
participating in the program. The Board also considered the potential 
for the existing senior mortgage holder, who will receive proceeds from 
the refinancing that are likely to exceed the holder's potential 
recovery in a foreclosure, to compensate a subordinate mortgage holder 
to participate in the Program. The Board encourages lenders to pursue 
such arrangements.
    The following matrix provides the mechanism for determining the 
future appreciation payment a subordinate lien holder is eligible to 
receive. The Board considers a number of benefits to be present with 
this approach. It provides an incentive to action by subordinate lien 
holders; reduces administrative costs; is simple to calculate and easy 
to understand; and voids competing appraisals.

                    Appreciation Sharing Payout Matrix
------------------------------------------------------------------------
                                                            Percent of
                                                              unpaid
                                                           principal and
                 Subordinate lien holder                   interest that
                                                          lien holder is
                                                            eligible to
                                                             receive*
------------------------------------------------------------------------
Cumulative CLTV >135%...................................              9%
Cumulative CLTV <=135%..................................             12%
------------------------------------------------------------------------
* Appreciation payment to a subordinate lien holder will depend on
  actual appreciation at the time of sale of the property and will be
  limited by the amount of future appreciation HUD receives. Payment
  will be made according to the subordinate lien holder's position of
  priority in relation to the property at the time the Program mortgage
  is originated, and will be based upon principal and interest on the
  date of origination of the Program mortgage, calculated at the pre-
  default contract rate of interest.

    In establishing the maximum payments allowable to a subordinate 
mortgage holder, the Board took into account information received from 
market participants concerning the price received in the market 
currently for delinquent subordinate mortgages. The Board expects that 
the majority of subordinate mortgages offered to the Program will be 
delinquent. The information provided by market participants indicates 
that delinquent subordinate mortgages currently trade at substantially 
below their par values, with market values within the ranges 
established by the Board. Moreover, the information provided suggests 
that subordinate mortgages that are even 30 days delinquent are very 
likely to default and yield no recovery value to the holder of the 
subordinate mortgage. Indeed, it is common practice for holders to 
write-down the value of delinquent subordinate mortgages in portfolios 
and in securitized pools to zero once the loans are 180 days past due.
    In establishing the maximum amounts that a subordinate mortgage 
holder may receive through receipt of an interest in the future 
appreciation of the property, the Board also took into consideration 
that subordinate mortgage holders receiving compensation in the form of 
future appreciation rights, may require additional compensation to 
participate in the Program to reflect the time value of money and 
uncertainty about the extent and timing of property appreciation. A 
certificate entitling the holder to receive a portion of future 
appreciation on a property may be worth little or nothing if the 
property experiences little or no appreciation. Moreover, appreciation 
rights are exercised upon sale or other disposition of the property, 
the timing of which is determined by the homeowner, rather than the 
claim holder. As a result, if homeowners that have a mortgage insured 
under the Program sell quickly, appreciation rights will have less 
value. Since homeowners participating in the Program have an incentive 
to sell the property to escape the shared appreciation requirement, 
claim holders may discount the value of shared appreciation rights. 
Accounting for these factors is inherently imprecise; nonetheless, 
using models based in part on option-pricing concepts, the Board 
believes that providing the holder of a subordinate mortgage the right 
to receive a maximum of 9 to 12 percent of the unpaid principal and 
interest on the subordinate mortgage out of the future appreciation, if 
any, on the property should likely provide the

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holder about the same risk-adjusted compensation as the holder would 
receive from a current cash payment equal to the approximate current 
market value of a delinquent subordinate lien of the same amount and 
CLTV.

Findings and Certifications

Administrative Procedure Act

    This final rule is being issued and will become effective without a 
public comment period. Section 553(a) of the Administrative Procedure 
Act (5 U.S.C. 551 et seq.) (APA) provides that advance notice and 
public comment procedures do not apply to a matter relating to agency 
management or personnel or to public property, loans, grants, benefits 
or contracts (see 5 U.S.C. 553(a)). This final rule establishes 
regulations for a new mortgage insurance program under the supervision 
of the Board and is therefore exempt from notice and comment rulemaking 
as provided in 5 U.S.C. 553(a).
    This final rule will become effective upon publication in the 
Federal Register. Section 553(d) of the APA provides that substantive 
rules, such as this rule, shall be made effective not less than 30 days 
after publication unless, among other things, an agency finds good 
cause to provide an earlier effective date. Good cause exists for these 
regulations to be immediately effective. This is a voluntary and 
temporary program designed to address the immediate needs of homeowners 
facing foreclosure, and HERA provides for this Program to begin October 
1, 2008, in order that homeowners can take advantage of the mortgage 
relief offered by this Program. The immediate effective date of this 
rule is consistent with the statutory authority. The objective for 
expedient action by the Board to have this Program commence at the 
beginning of the new Federal fiscal year is motivated by the high level 
of at-risk borrowers and weak conditions in the housing market.

Executive Order 12866, Regulatory Planning and Review

    The Office of Management and Budget (OMB) reviewed this rule under 
Executive Order 12866, Regulatory Planning and Review. OMB determined 
that this rule is an economically significant regulatory action as 
defined in section 3(f) of the Order. Accordingly, an economic analysis 
was prepared for this rule.
    This Program has the potential to have significant economic 
benefits. The major unknown is participation. If 10,000 participate in 
the Program, the aggregate net benefit of the Program may exceed $100M. 
It is possible that there will be more participants than 10,000, or 
less, in which case the net benefits increase or decrease, as the case 
may be. There are other factors important in determining the aggregate 
impact on the economy. The net benefit to the lender was estimated to 
be $10,000 but, as the economic analysis discusses, it may be higher. A 
higher net benefit to the senior lien holder would increase the 
expected benefit of preventing a foreclosure. There are also economic 
benefits to the community from preventing foreclosure. HUD anticipates 
that the net economic benefits will exceed the costs based on initial 
analysis.
    The docket file for this rule, which includes the economic 
analysis, is available for public inspection in the Regulations 
Division, Office of General Counsel, Department of Housing and Urban 
Development, 451 7th Street, SW., Room 10276, Washington, DC 20410-
0500. Due to security measures at the HUD Headquarters building, an 
advance appointment to review the public comments must be scheduled by 
calling the Regulations Division at 202-402-3055 (this is not a toll-
free number). Individuals with speech or hearing impairments may access 
this number via TTY by calling the Federal Information Relay Service at 
(800) 877-8339.

Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either imposes substantial direct compliance costs on state and local 
governments and is not required by statute, or the rule preempts state 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This rule does not have federalism 
implications and does not impose substantial direct compliance costs on 
state and local governments nor preempts state law within the meaning 
of the Executive Order.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) establishes requirements for federal agencies to 
assess the effects of their regulatory actions on state, local, and 
tribal governments and the private sector. This rule will not impose 
any federal mandates on any state, local, or tribal governments or the 
private sector within the meaning of UMRA.

Congressional Review Act

    OMB has determined that this rule constitutes a ``major rule'' as 
defined in the Congressional Review Act (CRA) (5 U.S.C. 801 et seq.). 
Generally, a major rule under the CRA has a 60-day delayed effective 
date and is required to be submitted to Congress in accordance with the 
requirements of the CRA. Section 808 of the CRA allows a rule to become 
effective sooner than otherwise provided by the CRA, if the agency, for 
good cause, finds that notice and public procedure are impracticable, 
unnecessary, or contrary to the public interest. This finding and a 
brief statement of the reasons for the finding must be incorporated in 
the rule. (See 5 U.S.C. 808(2)). As stated in this preamble under the 
section that addresses APA requirements, this rule is exempt from the 
notice and comment procedures of the APA. As also discussed in 
connection with the APA requirements, this Program is a voluntary and 
temporary measure designed to prevent eligible borrowers whose 
mortgages are at risk of foreclosure from losing their homes. Some of 
these borrowers are facing foreclosure now or may in the very near 
future, making the need for implementation of the Program immediate. A 
60-day delay in the effective date of this rule would therefore be 
contrary to the public interest. Thus, good cause exists to make this 
rule effective as close as possible to October 1, 2008, which is the 
date on which the HERA provides for the Program to begin. The Board 
will submit this rule and other required information to Congress as 
required by the CRA.

List of Subjects in 24 CFR Part 4001

    Administrative procedures, Practice and procedure, Mortgage 
insurance, Reporting and recordkeeping requirements.


0
For the reasons set forth in the preamble, the Board of Directors of 
the Hope for Homeowners Program establishes a new Chapter XXIV 
consisting of part 4001 in Title 24 of the Code of Federal Regulations 
to read as follows:

CHAPTER XXIV--BOARD OF DIRECTORS OF THE HOPE FOR HOMEOWNERS PROGRAM

PART 4001--HOPE FOR HOMEOWNERS PROGRAM

Subpart A--HOPE for Homeowners Program--General Requirements
Sec
4001.01 Purpose of program.
4001.03 Requirements and delegated authority.
4001.05 Approval of mortgagees.
4001.07 Definitions.

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Subpart B--Eligibility Requirements and Underwriting Procedures
4001.102 Cross-reference.
4001.104 Eligible mortgages.
4001.106 Eligible mortgagors.
4001.108 Eligible properties.
4001.110 Underwriting.
4001.112 Income verification.
4001.114 Appraisal.
4001.116 Representations and prohibitions.
4001.118 Equity sharing.
4001.120 Appreciation sharing.
4001.122 Fees and closing costs.
Subpart C--Rights and Obligations under the Contract of Insurance
4001.201 Cross-reference.
4001.203 Calculation of upfront and annual mortgage insurance 
premiums for Program mortgages.
Subpart D--Servicing responsibilities
4001.301 Cross-reference.
4001.303 Prohibition on subordinate liens during first five years.
Subpart E--Enforcement

Mortgagor False Information

4001.401 Notice of false information from mortgagor-procedure.

Appraiser Independence

4001.403 Prohibitions on interested parties in insured mortgage 
transaction.

Mortgagees

4001.405 Mortgagees.
Appendix A to Part 4001--Calculation of Future Appreciation Payment.

    Authority: 12 U.S.C. 1701z-22.

Subpart A--HOPE for Homeowners Program--General Requirements


Sec.  4001.01  Purpose of program.

    The HOPE for Homeowners Program is a temporary program authorized 
by section 257 of the National Housing Act, established within the 
Federal Housing Administration (FHA) of the Department of Housing and 
Urban Development (HUD) that offers homeowners and existing loan 
holders (or servicers acting on their behalf) FHA insurance on 
refinanced loans for distressed borrowers to support long-term 
sustainable homeownership by, among other things, allowing homeowners 
to avoid foreclosure. The HOPE for Homeowners Program is administered 
by HUD through FHA.


Sec.  4001.03  Requirements and delegated authority.

    (a) Core requirements. This subpart establishes the core 
requirements for the HOPE for Homeowners Program that have been adopted 
by the Board of Directors (Board) for the HOPE for Homeowners Program 
(Program). In addition to the core requirements, codified in this 
subpart, the Board of Directors may adopt and issue additional 
requirements, standards and policies through non-codified regulations, 
including through order, Federal Register notice, or other statement, 
such as a mortgagee letter, to be issued and implemented by FHA.
    (b) Basic Program parameters. (1) FHA is authorized to insure 
eligible refinanced mortgages under the Program commencing no earlier 
than October 1, 2008. The authority to insure additional mortgages 
under the Program expires September 30, 2011.
    (2) Under this Program, an eligible mortgagor may obtain a 
refinancing of his or her existing mortgage(s) with a new mortgage loan 
insured by FHA, subject to conditions and restrictions specified in 
section 257 of the National Housing Act and requirements established by 
the Board.
    (c) Delegated authority. HUD is statutorily charged with 
administering, through FHA, the Program. In carrying out the Program 
requirements established by the Board, FHA is directed to issue such 
interim guidance and mortgagee letters as FHA determines necessary or 
appropriate, within the parameters of the requirements, standards and 
policies adopted by the Board. In addition to FHA's statutory charge, 
the Board of Directors authorizes FHA to address unique or case-by-case 
situations as may be encountered by FHA in carrying out the Program, 
and to take such action as may be necessary to implement the Board's 
requirements. This delegated implementing authority includes, but is 
not limited to, specifying application forms, mortgage application 
procedures, certifications or other assurances, and other information 
collection requirements, subject to such rules, standards and policies 
as the Board may adopt.
    (d) Other applicable requirements. Except as may be otherwise 
provided by the Board, the provisions and requirements in the FHA 
regulations in 24 CFR part 203, which are generally applicable to all 
FHA-insured single family mortgage insurance programs, also apply with 
respect to the insurance of a refinanced eligible mortgage under the 
Program.


Sec.  4001.05  Approval of mortgagees.

    (a) Eligibility. In order for a mortgage to be eligible for 
insurance under this part, the mortgagee originating the mortgage loan 
and seeking mortgage insurance under this part shall have been approved 
by the Secretary pursuant to 24 CFR part 202.
    (b) Mortgagee whose loan is to be refinanced. A mortgagee holding 
or servicing an eligible mortgage to be refinanced and insured under 
section 257 of the National Housing Act is not required to be an 
approved mortgagee as required in paragraph (a) of this section, unless 
it seeks to be the originator of the refinanced mortgage to be insured 
by FHA.


Sec.  4001.07  Definitions.

    As used in this part and in the Program, the following definitions 
apply.
    Act means the National Housing Act (12 U.S.C. 1701 et seq. ).
    Allowable closing costs mean charges, fees and discounts that the 
mortgagee may collect from the mortgagor as provided in 24 CFR 
203.27(a).
    Board means the Board of Directors for the HOPE for Homeowners 
Program, which is comprised of the Secretary of HUD, the Secretary of 
the Treasury, the Chairman of the Board of Governors of the Federal 
Reserve System (Federal Reserve Board), and the Chairperson of the 
Board of Directors of the Federal Deposit Insurance Corporation or the 
designees of each such individual.
    Capital improvements means a repair, renovation, or addition to a 
property that significantly enhances the value of the property, but 
does not include expenses for interior decor, landscape maintenance, or 
normal maintenance or replacement expenses.
    Contract of insurance means the agreement by which FHA provides 
mortgage insurance to a mortgagee.
    Default and delinquency fees means late charges contained in a 
mortgage/security instrument for the late or non-receipt of payments 
from mortgagors after the date upon which payment is due, including 
charges imposed by the mortgagee for the return of payments on the 
mortgage due to non-sufficient funds.
    Direct financial benefit, as used in section 257(e)(1)(A)(ii)(II) 
of the Act, consists of the greater of two factors:
    (1) The amount of initial equity the mortgagor has in the property 
at the closing for the Program mortgage as determined under Sec.  
4001.118; and
    (2) The total amount that the existing senior mortgage and all 
existing subordinate mortgages on the property have been written down.
    Disposition means any transaction that results in whole or partial 
transfer of title of a property other than--
    (1) A sale of the property; or
    (2) Any transaction or transfer specified in 12 U.S.C. Sec.  1701j-
3(d)(1) through (8).
    Eligible Mortgage means a mortgage as defined in Sec.  4001.104.
    Existing senior mortgage means an eligible mortgage that has 
superior

[[Page 58422]]

priority and is being refinanced by a mortgage insured under section 
257 of the Act.
    Existing subordinate mortgage means a mortgage that is subordinate 
in priority to an eligible mortgage which is being refinanced by a 
mortgage insured under section 257 of the Act.
    FHA means the Federal Housing Administration.
    HOPE for Homeowners Program (or Program) means the program 
established under section 257 of the Act.
    HUD means the Department of Housing and Urban Development.
    Intentionally defaulted for purposes of section 257(e)(1)(A) of the 
Act means the mortgagor:
    (1) Knowingly failed to make payment on the mortgage or debt;
    (2) Had available funds at the time payment on the mortgage or debt 
was due that could pay the mortgage or debt without undue hardship; and
    (3) The debt was not subject to a bona fide dispute.
    Mortgage has the same meaning as provided in 24 CFR 203.17(a)(1).
    Mortgagee has the same meaning as provided in 24 CFR 203.251(f).
    Mortgagor has the same meaning as provided in 24 CFR 203.251(e).
    Premium pricing means the price for the sale of a mortgage loan 
with an above market rate of interest.
    Prepayment penalties mean such amounts as defined in 12 CFR 
226.32(d)(6) of the Federal Reserve Board's Regulation Z (Truth in 
Lending).
    Primary residence means the dwelling where the mortgagor maintains 
his or her permanent place of abode and typically spends the majority 
of the calendar year. A mortgagor can only have one primary residence.
    Program mortgage means the mortgage into which the existing senior 
mortgage is refinanced.
    Secretary means the Secretary of Housing and Urban Development.
    Total monthly mortgage payment means the sum of:
    (1) Principal and interest, as determined on a fully indexed and 
fully amortized basis; and
    (2) Escrowed amounts. (i) The monthly required amount collected by 
or on behalf of the mortgagee for real estate taxes, premiums for 
required hazard and mortgage insurance, homeowners' association dues, 
ground rent, special assessments, water and sewer charges and other 
similar charges required by the note or security instrument; or
    (ii) For mortgages not subject to escrow deposits, \1/12\ of the 
estimated annual costs for items listed in paragraph (2)(i) of this 
definition.

Subpart B--Eligibility Requirements and Underwriting Procedures


Sec.  4001.102  Cross-reference.

    (a) All of the provisions of 24 CFR part 203, subpart A, concerning 
eligibility requirements of mortgages covering one-family dwellings 
under section 203 of the National Housing Act (12 U.S.C. 1709) apply to 
mortgages on one-family dwellings to be insured under section 257 of 
the National Housing Act (12 U.S.C. 1701z-22), except the following 
provisions: 203.7 Commitment Process; 203.10 Informed consumer choice 
for prospective FHA mortgagors; 203.12 Mortgage insurance on proposed 
or new subdivisions; 203.14 Builder's warranty; 203.16 Certificate and 
contract regarding use of dwelling for transient or hotel purposes; 
203.18 Maximum mortgage amounts; 203.18a Solar-energy system; 203.18b 
Increased mortgage amount; 203.18c One-time or up-front MIP excluded 
from limitations on maximum mortgage amounts; 203.18d Minimum principal 
loan amount; 203.19 Mortgagor's minimum investment; 203.20 Agreed 
interest rate; 203.29 Eligible mortgage in Alaska, Guam, Hawaii or the 
Virgin Islands; 203.32 Mortgage lien; 203.37a Sale of property; 203.42 
Rental properties; 203.43 Eligibility of miscellaneous types of 
mortgages; 203.43a Eligibility of mortgages covering housing in certain 
neighborhoods; 203.43d Eligibility of mortgages in certain communities; 
203.43e Eligibility of mortgages covering houses in federally impacted 
areas; 203.43g Eligibility of mortgages in certain communities; 203.43h 
Eligibility of mortgages on Indian land insured pursuant to section 248 
of the National Housing Act; 203.43i Eligibility of mortgages on 
Hawaiian Home Lands insured pursuant to section 247 of the National 
Housing Act; 203.43j Eligibility of mortgages on Allegany Reservation 
of Seneca Nation Indians; 203.44 Eligibility of advances; 203.45 
Eligibility of graduated payment mortgages; 203.47 Eligibility of 
growing equity mortgages; 203.49 Eligibility of adjustable rate 
mortgages; 203.50 Eligibility of rehabilitation loans; 203.51 
Applicability; and 203.200-203.209 Insured Ten-Year Protection Plans 
(Plan).
    (b) For the purposes of this subpart, all references in 24 CFR part 
203, subpart A, to section 203 of the Act shall be construed to refer 
to section 257 of the Act. Any references in 24 CFR part 203, subpart 
A, to the ``Mutual Mortgage Insurance Fund'' shall be deemed to be to 
the Home Ownership Preservation Entity Fund, and any references to 
``the Commissioner'' shall be deemed to be to the Board or the 
Commissioner (as the context may require).
    (c) If there is any conflict in the application of any requirement 
of 24 CFR part 203, subpart A, to this part the provisions of this part 
shall control.


Sec.  4001.104  Eligible mortgages.

    A mortgage eligible to be refinanced under section 257 of the Act 
must:
    (a) Have been originated on or before January 1, 2008;
    (b) Be secured by a property owned and occupied by the mortgagor as 
his or her primary residence, and be the only residence in which the 
mortgagor has any present ownership interest; and
    (c) Meet such other requirements as the Board may adopt.


Sec.  4001.106  Eligible mortgagors.

    In order for a mortgagor to be eligible to refinance his or her 
existing mortgages under section 257 of the Act, the mortgagor must:
    (a) Have had, on March 1, 2008, a monthly total mortgage payment of 
more than 31 percent of the mortgagor's monthly gross income;
    (b) Not have an ownership interest in any other residential 
property;
    (c) Not have been convicted of fraud under federal or state law in 
the past 10 years;
    (d) Certify that the mortgagor has not intentionally defaulted on 
any mortgage or debt and has not knowingly, or willfully and with 
actual knowledge, furnished material information know to be false for 
purposes of obtaining any Program mortgage; and
    (e) Meet such other requirements as the Board may adopt.


Sec.  4001.108  Eligible properties.

    (a) A mortgage may be insured under the Program only if the 
property that is to be the security for the mortgage is a one-family 
residence.
    (b) The following property types are eligible to secure a mortgage 
insured under the Program:
    (1) Detached and semi-detached dwellings;
    (2) A condominium unit;
    (3) A cooperative unit; or
    (4) A manufactured home that is permanently affixed to realty and 
is treated as realty under applicable state law except state taxation 
law.


Sec.  4001.110  Underwriting.

    A mortgage may be insured under the Program only if the following 
conditions are met:

[[Page 58423]]

    (a) Debt-to-income thresholds. Except as provided in paragraph (c) 
of this section:
    (1) Payment-to-income. The total monthly mortgage payment of the 
mortgagor under the Program mortgage does not exceed 31 percent of the 
mortgagor's monthly gross income; and
    (2) Debt-to-income. The sum of the total monthly mortgage payment 
under the Program mortgage and all monthly recurring expenses of the 
mortgagor does not exceed 43 percent of the mortgagor's monthly gross 
income.
    (b) Past credit performance. The mortgagor must have made at least 
six full payments on the existing senior mortgage being refinanced 
under the Program.
    (c) Trial modifications. For any mortgagor who is unable to meet 
the requirements of paragraph (a) of this section, a mortgage loan may 
nevertheless be presented for insurance by FHA under the Program if:
    (1) The mortgagor, using existing income, has made full and timely 
mortgage payments on the existing senior mortgage pursuant to the terms 
of the trial modification:
    (i) For the three consecutive months before submission of the 
application for the mortgage to be insured under the Program; and
    (ii) In an amount that is at least 90 percent of the estimated 
total monthly mortgage payment to be paid by the mortgagor on the 
Program mortgage.
    (2) The total monthly mortgage payment of the mortgagor under the 
Program mortgage does not exceed 38 percent of the mortgagor's monthly 
income; and
    (3) The sum of the total monthly mortgage payment under the Program 
mortgage and all monthly recurring expenses of the mortgagor does not 
exceed 50 percent of the mortgagor's monthly gross income.
    (d) Non-occupant co-borrowers. A mortgage loan may be insured by 
the FHA under the Program, even if one of the mortgagors on the loan 
(i.e. , a co-signer) does not reside at the residence securing the 
loan, provided that the non-resident mortgagor relinquishes all 
interests in the property that is to be security for the mortgage 
before an application is submitted for FHA insurance under the Program.
    (e) Amount of new mortgage payment. The mortgagor's total monthly 
payment on the mortgage to be insured under the Program must not be 
greater than the mortgagor's aggregate total monthly mortgage payment 
under the mortgagor's existing senior mortgage and all existing 
subordinate mortgages.
    (f) Limit on origination fees. Mortgagees may charge and collect 
from mortgagors allowable closing costs.


Sec.  4001.112  Income verification.

    The mortgagee shall use FHA's procedures to verify the mortgagor's 
income and shall comply with the following additional requirements:
    (a) The mortgagee shall document and verify the income of the 
mortgagor by obtaining a transcript of the borrower's Federal income 
tax returns or a copy of the borrower's Federal income tax returns 
obtained directly from the Internal Revenue Service for the most recent 
two years; and
    (b) The mortgagee shall document and verify the mortgagor's income 
in any case in which the mortgagor has not filed a Federal income tax 
return.


Sec.  4001.114  Appraisal.

    (a) The property shall be appraised by an appraiser on the FHA 
Appraiser Roster.
    (b) An appraisal of a property to be security for a Program 
mortgage shall be conducted in accordance with Uniform Standards of 
Professional Appraisal Practice (USPAP) but dated no more than 90 days 
from the date on which the mortgage transaction is closed, except as 
otherwise provided by the Board.
    (c) The mortgagee must inform the appraiser that copies of the 
appraisal may be shared with holders and servicers of existing 
subordinate mortgages.


Sec.  4001.116  Representations and prohibitions.

    (a) Underwriting and appraisal standards. In order for the Program 
mortgage to be eligible for insurance under the Program, the 
underwriter and the mortgagee must provide certifications, in a format 
approved by the FHA, that the mortgage is in compliance with the 
underwriting and the appraisal standards set forth in this part, and 
that it meets all requirements applicable to the Program. FHA may 
require additional certifications by the mortgagee to ensure compliance 
with such additional standards as the FHA deems necessary given the 
specific mortgage transaction presented.
    (b) Mortgagor's liability for repayment. (1) The mortgagor shall 
provide a certification to FHA that the mortgagor has not:
    (i) Intentionally defaulted on the mortgagor's existing 
mortgage(s), or any other debt; or
    (ii) Knowingly or willfully and with actual knowledge furnished 
material information known to be false for the purpose of obtaining the 
mortgagor's existing mortgage(s).
    (2) The mortgagor shall provide any other certifications that FHA 
may otherwise require.
    (3) A mortgagor obligated under a Program mortgage shall agree in 
writing, on a form approved by the Board, to be liable to pay to FHA 
any Direct Financial Benefit achieved from the reduction of 
indebtedness on the existing senior and subordinate mortgages that are 
being refinanced under the Program if he or she makes a false statement 
or other misrepresentation in the certifications and documentation 
required for Program eligibility, including but not limited to the 
certifications required under section 257(e)(1)(A)(i) of the Act.
    (c) Mortgagee in violation of Program requirements. (1) If the 
mortgagee holds a Program mortgage that it originated and/or 
underwrote, and FHA finds that the mortgagee violated the Program 
requirements, FHA is prohibited from paying FHA insurance benefits to 
that mortgagee.
    (2) If the mortgagee no longer holds the Program mortgage that it 
originated and/or underwrote, FHA will pay the insurance claim to the 
mortgagee presently holding the Program mortgage (if all other 
requirements of the contract for mortgage insurance are met and the 
present holder did not participate in the violation of Program 
requirements) and shall seek indemnification from the non-holding 
mortgagee.
    (d) FHA insurance. A mortgage is eligible for insurance if the 
mortgagee submits a complete case binder within 120 days from the date 
of closing of the mortgage, or such other time as the Board may 
prescribe. The binder shall include evidence acceptable to the Board 
that the mortgage is current.
    (e) Mortgagor failure to make first mortgage payment. FHA shall not 
pay a mortgage insurance claim to any mortgagee if the first total 
monthly mortgage payment is not made within the time frame established 
in paragraph (d) of this section. The mortgagee shall not, directly or 
indirectly, make all or a part of the first total monthly mortgage 
payment on behalf of the mortgagor. The mortgagee is prohibited from 
escrowing funds at closing for all or part of the first total monthly 
mortgage payment.


Sec.  4001.118  Equity sharing.

    (a) Initial Equity. For purposes of section 257(k)(1) of the Act, 
the initial equity created as a direct result of the origination of a 
Program mortgage on a property, as calculated by the Program mortgage 
lender, shall equal:
    (1) The appraised value of the property that was used at the time 
of origination of the Program mortgage to

[[Page 58424]]

underwrite the mortgage and to determine compliance with the maximum 
loan-to-value ratio at origination established by section 257(e)(2)(B) 
of the Act; less
    (2) The original principal amount of the Program mortgage on the 
property.
    (b) FHA's interest. Upon the sale or disposition of a property or 
Program mortgage refinancing, FHA shall calculate and be entitled to 
receive the portion of the initial equity (as defined by paragraph (a) 
of this section) set forth in section 257(k)(1) of the Act, subject to 
such standards and policies as the Board may establish.


Sec.  4001.120  Appreciation sharing.

    (a) Calculation of appreciation. For purposes of section 257(k)(2) 
of the Act, the amount of the appreciation in value of a property 
securing a Program mortgage that occurs between the date the mortgage 
was insured under section 257 of the Act and the date of any subsequent 
sale or disposition of the property shall be equal to the following, as 
such amounts of appreciation may be established to the satisfaction of 
FHA:
    (1) The gross proceeds from the sale or disposition of the property 
(calculated at the pre-default rate of interest); less
    (2) The amount of closing costs, as adopted by the Board, incurred 
by the mortgagor(s) in connection with such sale or disposition, if 
any; less
    (3) Seventy-five percent, as may be modified by the Board, of the 
actual expenditures for Capital Improvements made by the mortgagor(s) 
after the date of origination of the Program mortgage; and less
    (4) The appraised value of the property that was used at the time 
of origination of the Program mortgage to underwrite that mortgage and 
determine compliance with the maximum loan-to-value ratio at 
origination established by section 257(e)(2)(B) of the Act.
    (b) HUD's interest in appreciation. Upon sale or disposition of a 
property securing a Program mortgage, FHA shall be entitled to receive 
an amount equal to 50 percent of the appreciation in value of the 
property calculated in accordance with paragraph (a) of this section.
    (c) Eligibility of subordinate mortgage holders to receive a 
portion of appreciation in value. The persons or entities that hold, on 
the date of origination of a Program mortgage, an existing subordinate 
mortgage on the property shall be eligible to receive a portion of 
FHA's interest in the appreciation in value of the property, as 
determined in accordance with the provisions of this section and such 
additional standards and policies that the Board may establish, if:
    (1) The existing subordinate mortgage was originated on or before 
January 1, 2008;
    (2) The amount of the unpaid principal and interest on such 
existing subordinate mortgage on the date of origination of the Program 
mortgage is at least $2,500; and
    (3) Each person holding such existing subordinate mortgage agrees, 
in connection with the origination of the Program mortgage, to fully 
release:
    (i) The mortgagor(s) from any indebtedness under the existing 
subordinate mortgage; and
    (ii) The holder's mortgage lien on the property.
    (d) Shared appreciation interest of subordinate mortgage holders.
    (1) In general. The eligible holder(s) of an existing subordinate 
mortgage on a property securing a Program mortgage shall be eligible to 
receive, subject to paragraph (c)(3) of this section, an interest in 
FHA's interest in the appreciation in the value of such property up to 
the amount set forth in the Appendix to this part.
    (2) Form. The interest of an eligible holder of an existing 
subordinate mortgage under paragraph (d) of this section is evidenced 
in a shared appreciation certificate or other documentation to be 
issued by, or on behalf of, HUD.
    (3) Multiple subordinate liens. If there is more than one eligible 
existing subordinate mortgage on a property securing a Program 
mortgage, the interests of such eligible existing subordinate mortgages 
under paragraph (d)(1) of this section shall have priority among each 
other in the same order of priority that existed among the existing 
subordinate mortgages on the date of origination of the Program 
mortgage.
    (4) Distribution of appreciation interest to subordinate mortgage 
holders. Upon the sale or disposition of a property securing a Program 
mortgage other than sale or disposition related to a default, any 
proceeds due to FHA as a result of the appreciation in value of the 
property (as calculated in accordance with paragraph (a) of this 
section) shall be distributed:
    (i) First to the holders of any shared appreciation certificate or 
other documentation issued by HUD with respect to the property, if any, 
in accordance with paragraphs (d)(1), (d)(2), and (d)(3) of this 
section; and
    (ii) The remaining amounts, if any, will be retained by FHA.


Sec.  4001.122  Fees and closing costs.

    (a) The holder or servicer of the existing senior and subordinate 
mortgages shall either forgive or waive all prepayment penalties and 
delinquency and default fees.
    (b) Allowable closing costs incurred in connection with the 
refinancing and insurance of a mortgage under the Program can be paid 
from the following sources:
    (1) The mortgagor's assets;
    (2) The mortgagee holding or servicing the existing senior and 
subordinate mortgage or the mortgagee originating the Program mortgage;
    (3) Premium pricing by the mortgagee providing the Program 
mortgage;
    (4) Financed as part of the Program mortgage provided that the 
mortgage amount is adjusted accordingly, and the loan-to-value ratio 
does not exceed 90 percent (including the up-front premium required 
under Sec.  4001.203(a)(1));
    (5) A Federal, state, county or parish, or municipal program; or
    (6) Such other sources as the Board may permit.

Subpart C--Rights and Obligations Under the Contract of Insurance


Sec.  4001.201  Cross-reference.

    (a) All of the provisions of 24 CFR part 203, subpart B, covering 
mortgages insured under section 203 of the Act shall apply to mortgages 
insured under section 257 of the Act, except the following sections: 
203.256 Insurance of open-end advances; 203.259a Scope; 203.260 Amount 
of insurance premium; 203.261 Calculation of periodic MIP (periodic 
MIP); 203.270 Open-end insurance charges; 203.280 One-time of Up-front 
MIP; 203.281 Calculation of one-time MIP; 203.283 Refund of one-time 
MIP; 203.284 Calculation of up-front and annual MIP on or after July 1, 
1991; 203.285 Fifteen year mortgages: calculation of up-front and 
annual MIP on or after December 26, 1992; 203.415-203.417 Certificate 
of Claim; 203.420-203.427 Mutual Mortgage Insurance Fund and 
Distributive Shares; 203.436 Claim procedures--graduated payment 
mortgages; 203.438 Mortgages on Indian land insured pursuant to section 
248 of the National Housing Act; 203.439 Mortgages on Hawaiian home 
lands insured pursuant to section 247 of the National Housing Act; 
203.439a Mortgages on property in Allegheny Reservation of Seneca 
Nation of Indians authorized by section 203(q) of the National Housing 
Act; and 203.440-203.495 Rehabilitation Loans.
    (b) For the purposes of this subpart, all references in 24 CFR part 
203, subpart B, to section 203 of the Act shall be construed to refer 
to section 257 of the Act. Any references in 24 CFR part

[[Page 58425]]

203, subpart B, to the ``Mutual Mortgage Insurance Fund'' shall be 
deemed to be to the Home Ownership Preservation Entity Fund, and any 
references to ``the Commissioner'' shall be deemed to be to the Board 
or the Commissioner (as the context may require).
    (c) If there is any conflict in the application of any requirement 
of 24 CFR part 203, subpart B, to this part 4001, the provisions of 
part 4001 shall control.


Sec.  4001.203  Calculation of upfront and annual mortgage insurance 
premiums for Program mortgages.

    (a) Applicable premiums. Any mortgage presented for endorsement 
under section 257 on or after October 1, 2008, and prior to September 
30, 2011, shall be subject to the following requirements:
    (1) Upfront premium. FHA shall establish and collect a single 
premium payment equal to 3 percent of the amount of the original 
insured principal obligation of the Program mortgage.
    (2) Annual premium. In addition to the premium under paragraph 
(a)(1) of this section, FHA shall establish and collect an annual 
premium payment in an amount equal to 1.5 percent of the amount of the 
remaining insured principal balance of the Program mortgage.
    (b) Proceeds for payment of the upfront premium. The up-front 
premium shall be paid with proceeds from the Program mortgage through a 
reduction of the amount of indebtedness that existed on the eligible 
mortgage prior to its being refinanced.

Subpart D--Servicing Responsibilities


Sec.  4001.301  Cross-reference.

    (a) All of the provisions of 24 CFR part 203, subpart C, covering 
mortgages insured under section 203 of the Act shall apply to mortgages 
insured under section 257 of the Act, except as follows: 203.664 
Processing defaulted mortgages on property located on Indian land; 
203.665 Processing defaulted mortgages on property located on Hawaiian 
home lands; 203.666 Processing defaulted mortgages on property in 
Allegany Reservation of Seneca Nation of Indians; and 203-670-203.681 
Occupied Conveyance.
    (b) For the purposes of this subpart, all references in 24 CFR part 
203, subpart C, to section 203 of the Act shall be construed to refer 
to section 257 of the Act. Any references in 24 CFR part 203, subpart 
C, to the ``Mutual Mortgage Insurance Fund'' shall be deemed to be to 
the Home Ownership Preservation Entity Fund, and any references to 
``the Commissioner'' shall be deemed to be to the Board or the 
Commissioner (as the context may require).
    (c) If there is any conflict in the application of any requirement 
of 24 CFR part 203, subpart C, to this part 4001, the provisions of 
part 4001 shall control.


Sec.  4001.303  Prohibition on subordinate liens during first five 
years.

    (a) Prohibition on subordinate liens during first five years. 
Except as provided in paragraph (b) of this section, a mortgagor shall 
not, during the first 5 years of the term of the mortgagor's Program 
mortgage, incur any debt, take any action, or fail to take any action 
that would have the direct result of causing a lien to be placed on the 
property securing the Program mortgage if such lien would be 
subordinate to the Program mortgage.
    (b) Property preservation exception. Paragraph (a) of this section 
shall not prevent a mortgagor on the Program mortgage from incurring 
new mortgage debt secured by a lien on the property securing the 
Program mortgage that is subordinate to the Program mortgage if:
    (1) The proceeds of the new mortgage debt are necessary to ensure 
the maintenance of property standards, including health and safety 
standards;
    (2) Repair or remediation of the condition would preserve or 
increase the property's value;
    (3) The cost of the proposed repair or remediation is reasonable 
for the geographic market area;
    (4) The results of the repair or remediation are not primarily 
cosmetic;
    (5) The repair or remediation does not represent routine 
maintenance;
    (6) The new mortgage debt is closed-end credit, as defined in Sec.  
226.2 of the Federal Reserve Board's Regulation Z (12 CFR 226.2); and
    (7) The sum of the unpaid principal balance and accrued and unpaid 
interest on the Program mortgage and the original principal balance of 
the new mortgage debt:
    (i) Does not exceed 95 percent of the estimated appraised value of 
the property securing the Program mortgage after completion of the 
proposed repair or remediation; and
    (ii) Is less than:
    (A) The estimated appraised value of the property securing the 
Program mortgage after completion of the proposed repair or 
remediation; less
    (B) FHA's proportionate share of the initial equity created upon 
origination of the Program mortgage as determined pursuant to the 
schedule set forth in section 257(k)(1) of the Act as if a sale of the 
property had occurred on the date of origination of the new mortgage 
debt.

Subpart E--Enforcement

Mortgagor False Information


Sec.  4001.401  Notice of false information from mortgagor-procedure.

    (a) If FHA finds that the mortgagor has made a false certification 
or provided false information via any means, including but not limited 
to false documentation, FHA shall inform the mortgagor, in writing or 
any other acceptable format, of such fact.
    (b) The notice shall be sent to the mortgagor's last known address 
by both certified and ordinary mail. The notice shall state with 
specificity the misrepresentation or false statement made by the 
mortgagor. The notice shall include a request for repayment of the 
Direct Financial Benefit that the mortgagor is deemed to have received, 
as determined by FHA, by the refinancing of the eligible mortgage and 
subordinate mortgages. This does not preclude HUD or the United States 
from bringing any other action that they may be authorized to bring.
    (c) The mortgagor may request a hearing before a Hearing Officer. 
The hearing will be conducted in accordance with the provisions of 24 
CFR part 26, subpart A, except as modified by this section. Requests 
for a hearing must be made within 45 days from the date of the false 
information notice.

Appraiser Independence


Sec.  4001.403  Prohibitions on interested parties in insured mortgage 
transaction.

    (a) A mortgage lender, mortgage broker, mortgage banker, real 
estate broker, appraisal management company or employee thereof, and 
any person with an interest in a real estate transaction involving an 
appraisal conducted as part of the process for insuring a mortgage 
under section 257 of the Act shall not improperly influence or attempt 
to improperly influence through any means, including but not limited to 
coercion, extortion, collusion, compensation, instruction, inducement, 
intimidation, nonpayment for services rendered, or bribery, the 
development, reporting, result or review of a real estate appraisal 
sought in connection with the origination, processing and closing of 
the mortgage for insurance.
    (b) HUD may, pursuant to its authority under section 536(a) of the 
Act, bring an action to impose a civil money penalty for a violation of 
paragraph (a) of this section.
    (c) The authority to bring a civil money penalty under this section 
shall not preclude HUD from bringing any other action that HUD may be

[[Page 58426]]

authorized to bring for a violation of paragraph (a) of this section.

Mortgagees


Sec.  4001.405  Mortgagees.

    (a) FHA is authorized by the Board to engage in monitoring 
activities to ensure mortgagee compliance with the requirements of this 
Program. The Mortgagee Review Board at HUD is authorized by the Board 
to impose sanctions and civil money penalties against mortgagees that 
violate program requirements under this part. The authority of the 
Mortgagee Review Board to impose sanctions and civil penalties shall 
not preclude HUD from bringing any other action that HUD may be 
authorized to bring.
    (b) Nonpayment of mortgage insurance claims for reasons established 
in Sec.  4001.16 shall not preclude the Mortgagee Review Board or HUD 
from bringing any action against the mortgagee that the Mortgagee 
Review Board or HUD are authorized to bring.
    (c) The mortgagee may request a hearing before a Hearing Officer. 
The hearing will be conducted in accordance with the provisions of 24 
CFR part 26, subpart A, except as modified by this section. Requests 
for a hearing must be made within 45 days from the date of the false 
information notice.

Appendix A to Part 4001--Calculation of Future Appreciation Payment

------------------------------------------------------------------------
                                                            Percent of
                                                              unpaid
                                                           principal and
             Subordinate lien holder's CLTV                interest that
                                                          lien holder is
                                                            eligible to
                                                              receive
------------------------------------------------------------------------
Cumulative CLTV >135%...................................              9%
Cumulative CLTV <=135%..................................             12%
------------------------------------------------------------------------
Note: Appreciation payment to a subordinate lien holder will depend on
  actual appreciation at the time of sale of the property and will be
  limited by the amount of future appreciation HUD receives. Payment
  will be made according to the subordinate lien holder's position of
  priority in relation to the property at the time the H4H mortgage is
  originated, and will be based upon principal and interest on the date
  of origination of the Program mortgage, calculated at the pre-default
  contract rate of interest.


    Dated at Washington, DC, this 30th day of September, 2008.

    By order of the Board of Directors of the HOPE for Homeowners 
Program.
Margaret E. Burns,
Executive Director of the Board.
 [FR Doc. E8-23612 Filed 10-3-08; 8:45 am]
BILLING CODE 4210-AA-P